The privileged few

2005-03-18T00:00:00+00:00

Schering Corporation was the registered proprietor of a patent for a therapeutic product. Cipla Ltd planned to launch the product on the European market. Prior to the planned launch Cipla wrote to Schering and headed the letter “without prejudice”.

In the letter Cipla stated it was aware Schering had registered a patent for a product but that Cipla believed Schering’s registered patent to be invalid. Cipla also it did not wish to engage in confrontation with Schering if there was an alternative commercial solution acceptable to both parties. The letter also stated that if no such solution were reached, Cipla would seek revocation of Schering’s patent prior to the launch of the product.

Schering did not respond to Cipla’s invitation to enter into negotiations and issued proceedings alleging patent infringement based only on the contents of the letter.

Cipla argued that the contents of the letter were to be treated as privileged and Schering had no material it could rely upon as the basis for its action. Schering contended that the letter was not privileged as it contained merely an assertion of Cipla's claim and not a willingness to negotiate.

Cipla applied to strike out the proceedings alleging patent infringement.

Reference

The court affirmed the principle that an opening shot in negotiations may be subject to privilege if the communication is intended to promote negotiations. In deciding whether the relevant letter was intended to promote negotiations, the court had to assess what, on a reasonable basis, the intention of the author was and put itself in the position of the reasonable recipient to determine the message conveyed.

The court decided that the letter had been an invitation to negotiate and the heading without prejudice reinforced that message. Cipla offered to negotiate in the letter by suggesting an alternative commercial solution and the letter to Schering was therefore subject to privilege.

Schering was not entitled to refer to the letter in its particulars of infringements and the action was struck out.

Postscript

This decision serves as a useful reminder to all parties who engage in commercial correspondence that simply marking a document “without prejudice” may not mean conclusively that the document is in fact privileged. It is merely one of the factors which indicates if the document is intended to be a negotiating document.

The court will determine whether or not the document was intended to be a bona fide negotiating document by assessing the intention of the author and the reaction of a reasonable recipient.